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Kadant Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

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Simply Wall St
·3 min read
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As you might know, Kadant Inc. (NYSE:KAI) just kicked off its latest third-quarter results with some very strong numbers. The company beat both earnings and revenue forecasts, with revenue of US$155m, some 7.0% above estimates, and statutory earnings per share (EPS) coming in at US$1.28, 34% ahead of expectations. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Kadant

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the consensus forecast from Kadant's five analysts is for revenues of US$663.3m in 2021, which would reflect a modest 2.2% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to bounce 33% to US$5.54. In the lead-up to this report, the analysts had been modelling revenues of US$655.5m and earnings per share (EPS) of US$5.20 in 2021. So the consensus seems to have become somewhat more optimistic on Kadant's earnings potential following these results.

The consensus price target rose 12% to US$116, suggesting that higher earnings estimates flow through to the stock's valuation as well. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Kadant analyst has a price target of US$116 per share, while the most pessimistic values it at US$115. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Kadant's revenue growth is expected to slow, with forecast 2.2% increase next year well below the historical 14%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 7.5% next year. Factoring in the forecast slowdown in growth, it seems obvious that Kadant is also expected to grow slower than other industry participants.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Kadant's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Kadant's revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that in mind, we wouldn't be too quick to come to a conclusion on Kadant. Long-term earnings power is much more important than next year's profits. We have forecasts for Kadant going out to 2022, and you can see them free on our platform here.

It is also worth noting that we have found 2 warning signs for Kadant that you need to take into consideration.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.